IMF encourages Saudi investments

The Saudi government can help the private sector to grow faster and create jobs through targeted investments, says a senior IMF official.

The Saudi government can help the private sector to grow faster and create jobs through targeted investments, says a senior IMF official.

Reforms could also help to lay the foundations for economic growth in the years ahead, said Masood Ahmed,the director of the agency's Middle East and Central Asia department.

"While there has been progress on diversification, the Saudi economy remains dependent on oil exports, and growth has been driven mainly by factor accumulation," he said after an IMF mission to the kingdom this month.

King Abdullah announced a US$130 billion (Dh477bn) spending package last year.

Two-month bonuses for public-sector employees, more unemployment benefits, and higher spending on social housing were part of the package. Signs of the stimulus seeping through to the economy have emerged with private-sector activity rising strongly this year.

"Reflecting prudent economic management, the economy is likely to remain buoyant," said Mr Ahmed. "The private sector is again expected to lead the way, reflecting the increased role of the private sector in the economy, a clear break from the past."

The economy was likely to grow by 6 per cent this year, down from last year's estimated growth of 7.1 per cent, he said.

The non-oil economy expanded by 8 per cent last year, the highest since 1981. The private sector grew by 8.5 per cent over the period, he said.

Higher oil production and strong economic performance meant the outlook for the economy remained robust, said Mr Ahmed. The kingdom raised output last year to offset the impact of unrest in Libya.

Mr Ahmed applauded those efforts to support the global economy during a period of uncertainty.

"Higher imports and increased workers' remittances linked to the strong growth of the Saudi economy, together with expanded financial assistance have exerted a positive spillover and helped support other economies in the region and beyond," he said.

Fiscal and external surpluses were expected to remain strong at almost 17 and 27 per cent of GDP, respectively, he added.

Inflation was expected to remain modest at 5 per cent but needed to be monitored for signs of economic overheating, he warned.